Reflections and confessions of an erstwhile economist.

• Author: McTeer, Robert D., Jr.
• Position: Distinguished Guest Lecture

My invitation to speak here today reminded me of Southern Economic Association (SEA) conventions I attended in the 1960s as a student at the University of Georgia. Professor James Waller took me to the first one. It was my first plane ride, and the first leg was from Athens to Atlanta on a four-seater, including the pilot and copilot seats occupied by Georgia students. The doors weren't sealed, and the air rushed in, cold and loud.

Another memorable Southern was in Atlanta in 1963. I was on my way home for the quarter, and someone slit the top of my 1957 Ford convertible and stole all my clothes. I was parked near Georgia Tech.

I also remember one here in New Orleans in 1967. I was supposed to do job interviews, but I hooked up with two Georgia buddies--Chuck Maurice and Phil Gramm--who had recently joined the Texas A&M faculty. Their new friend Bob Ekelund had his car, which was a distraction. The upshot was that I forgot to do job interviews. Which is how I ended up at the Fed.

About the only thing I still recall from those meetings is that economists revealed a preference for Scotch over bourbon. Later, at banking conventions, I learned that bankers serve cheap bourbon and Scotch but expensive gin. I've been suspicious of bankers and economists ever since. I'll leave the drinking habits of bank economists for another time.

My high school English teacher wanted me to study law like her son. I thought accounting would be a good prelaw major and the combination would make me rich. My business-law class disabused me of the first notion, and my accounting class did it for the second. I didn't realize that the accounting profession and the law would collide early in the new millennium.

My attraction to economics began in Professor Waller's Money and Banking class--James Waller, my mentor. I hope some of you remember him. He was responsible for my majoring in economics, for my going to graduate school, and for my thinking that I would make a splendid professor. By the way, I also met my wife, Suzanne, in his class. He came to our wedding.

These good things happened because, for some reason, I was good at those T-Account transactions in Money and Banking. Money creation, multiple expansion, the impact of open market operations--that sort of thing. I was even pretty good at manipulating the equation of exchange and the graphs of the simple Keynesian model.

Professor Waller, a slow-walking, Southern-talking, white-haired curmudgeon who looked like Colonel Sanders, was not a patient man. He would cover something in class one time and tell the students to see me after class if they didn't get it. He made me his "grader" and recommended me to his students as a tutor. I was even the economics tutor for the football team. That didn't last long because I didn't get hazardous-duty pay.

Because I've bragged about my money and banking arithmetic, I must confess to being seriously deficient in real math. I didn't have the math background needed for graduate economics, but I didn't realize it until too late. I remember my shock when I first learned that a line on a graph could be expressed as an equation, and vice versa. I wondered why anyone would ever want to do such a thing. Given this Achilles' heel, I knew I would never thrive as an economists economist in the cruel publish-or-perish world. I was destined to forever bear the stigma of being "nonquantitative."

I would like to argue that academic economists often overdo quantitative analysis, which sometimes amounts to window dressing. My hunch is that this causes many economists to miss opportunities to have more influence in the so-called real world. I would like to argue that, but I can't because I don't have the standing. Only economists who've demonstrated math virtuosity in numerous publications can make that argument credibly. Only Nixon could go to China.

Larry Summers, current president of Harvard, former Treasury secretary, and former boy-wonder economist, is such a person. Here's how he put it in 1991: "Too often researchers, referees and editors fail to ask these scientific questions. Instead, they ask the same questions that jugglers' audiences ask--Have virtuosity and skill been demonstrated? Was something difficult done? Often these questions can be answered favorably even where no substantive contribution is being made" (Klein 2001, p. 45).

I only recently became aware of the debate over the role of economists in influencing the real world that is associated with George Stigler and Milton Friedman. To oversimplify, the Stigler position is that economists should talk mainly to other economists at a lofty level and try to extend the frontiers of the science. It's a waste of time trying to educate laymen in economic principles with a view toward improving public policy. Economists should not preach to noneconomists, who already know all they want to know about their self-interest. They aren't likely to respond favorably to an altar call. As they say about putting lipstick on a pig, it's a waste of time, and it annoys the pig.

The other view, dating back at least to Adam Smith and generally associated with Milton Friedman, is that economists should try to educate the public on basic economics, which would ultimately lead to better public policy. Economists can stay in their ivory tower most of the time, but they should come down occasionally to share their knowledge and insights with the local Rotary Club. They should learn to communicate with "everyman." Without knowing about this particular controversy, the Dallas Fed has been trying to do this in its economic education programs. I think of economic education as making the world safe for sounder policy.

I was in London a couple of weeks ago visiting the Bank of England and speaking at the Institute of Economic Affairs (IEA). I spent 10 pounds of my own money for an IEA publication on just this subject, titled A...